The Treasury should remove insurance premium tax from telematics insurance policies for under-25’s says the Road Safety Foundation today.  This key recommendation is announced by the charity early to meet the Treasury’s consultation timetable for budget proposals which has just closed.

Road crashes are the leading cause of death and life changing injury for young people.   Successive governments over 20 years have stalled over “graduated licensing” which has been introduced in countries such as the USA, Sweden and New Zealand.  Graduated licensing typically places restrictions on night time driving or the number of passengers carried by young drivers. Last year the government told Parliament:

“the safety of young people on the roads is very important to us. But we are wrestling with how to make things safer, whilst not unduly restricting the freedom of our young people.”

Commenting on the Foundation’s recommendation, Council Member John Dawson said:

“Telematics insurance is a 21st century solution for a problem which governments admit they have wrestled with for 20 years.  Governments have been unwilling to implement restrictions such as bans on night time driving or carrying passengers. Technology means not only can we make young driver insurance cheaper but it avoids restrictions such as bans on night time driving or carrying passengers. Telematics insurance is relatively new but already a quarter of all under-25’s are insured in this way and it means we can make young driver insurance cheaper.  There are now more than a dozen products on the market and all major insurers provide some form of offering. We can now accelerate the take-up in a competitive market and save thousands of deaths or injuries annually.

“Parents often provide the car and pay high insurance premiums.  Because crashes are less frequent, telematics insurance reduces insurance costs.  It can give reassurance that the car is being well driven – and early warning before it is too late.”

The Road Safety Foundation’s proposals include a solid business case for the tax break which it estimates will result in a £500m net saving to the economy from reduced crash costs including benefits to the NHS and long term care services.

John Dawson concludes:  “Telematics insurance is relatively new, but around a quarter of all under-25’s are already insured in this way.  There are more than 15 products on the market and all major insurers provide some form of offering in a competitive market.   Our tax proposals for a 7-year zero rating of Insurance Premium Tax could create an additional 250,000 under-25 telematics policies and help see two thirds of under-25s choosing to insure this way.  This would mean 2,500 injury crashes prevented annually by year seven, as well as cheaper insurance for young drivers or parents. ”

The Foundation is looking to the insurance industry to support its proposal.  The installation of telematics technology in the vehicle adds to the cost, but a tax break would defray these costs and would attract further uptake among drivers.  The Foundation is also seeking insurers’ support in continuously improving feedback to young drivers.

The proposal is one of seven major recommendations which the Foundation will launch in Parliament next month.  Its forthcoming report on Britain’s future Road Safety Strategy will be released on 3 November and will address safer driving, roads and vehicles and new financial instruments for road safety.

The Foundation is grateful to Ageas UK, ingenie, FIA Foundation and Rees Jeffreys Road Fund together with many individuals and safety charities for their support in preparation of the report.

A summary of the business case and full submission to HM Treasury can be found below:


To download the press release, please click here

To download report extracts, please click here


Media contacts

Road Safety Foundation

Caroline Moore on 01256 345598 or 07787 228166



Becky Hadley 020 7808 7997